The Future of ERP: Public Cloud

An ERP cloud strategy requires a willingness to let go of well established and outdated processes. Overall, companies perform better when they make a long-term shift to the public cloud.

Whether it’s about sharing documents and photos, or sending e-mails, the cloud functions as a form of Dropbox for Gmail or the iCloud and has long been an important link for private internet users.

Private users have grown accustomed to the standard functionalities. This development is imminent for the business-to-business sector, as “what modern-day consumers use in their private lives today will appear in the companies of tomorrow,” says Heiko Mauersberg, vice president of Business Development Cloud Solutions at SAP, who has spent the past 27 years working with ERP software, 15 of which with ERP in the cloud.

Cloud Disruption: Move Toward the Public Cloud

Current developments in the market confirm this trend: The global market for services related to the public cloud is expected to climb by 17% in 2017 to reach €217 billion, compared to 16% in 2016. The German market has also grow so strongly that market research firm IDC spoke of “cloud disruption” in Germany at the start of the year.

While IDC currently regards 40% of companies as “cloud ready,” analysts estimate that this figure will be 63% in the next two years — integrated in a “cloud first” approach.

According to the Cloud Monitor 2017 study conducted by IT industry association bitkom and the consulting company KPMG, there has never been so much enthusiasm for cloud technologies in German companies. Nearly two-thirds of companies (65%) were using cloud technologies by the end of 2016 — 25% more than three years ago. Even the public cloud, which is strongly oriented toward the standards of the provider, is today used by almost one-third of companies (29%), 13% more than two years ago.

Cloud First: Only a Matter of Time

The general advantages of the cloud have long made their presence felt in companies. They do not require their own IT infrastructure, which protect the company’s own resources; the systems can be scaled up or down as preferred; applications can be quickly implemented; and innovations can be used immediately.

If current trends in the market continue to develop like this, it will come as no surprise if public cloud applications appear in many companies in the coming years. According to Mauersberg, “For many companies, the managed private cloud is an interim step on the way towards the public cloud.”

The benefits of the software-as-a-service (SaaS) solution (in the case of SAP) are that updates are automatically initiated four times a year, and “cloud first” innovations can be used, while managed private cloud users don’t need to conduct release updates but are consolidated once a year.

For Mauerberg, this constitutes “a gentle transition toward standardization.” He adds that “for companies that come from a heavily modified on-premise world, this interim step is necessary to enable system expandability to be gradually reduced.”

Mauersberg was never in doubt that companies could run without a lot of additional programmed custom developments: “Processes within customer relationship management, HR, and financials are very similar in many industries.”

Hybrid Strategy: System of Modular Cloud Components

The first ideas for an on-demand ERP came about 17 years ago, and were based on classic hosting solutions that could be booked on request. The first generation of ERP in the cloud involved mapping all company processes using one software in the cloud.

“The full suite should provide small companies with professional software without them needing an IT infrastructure,” explains Mauersberg, who was involved in the launch of SAP Business ByDesign, a software that is used today predominantly in midsize companies by up to 1,500 employees.

Today, the aim is to create modular cloud software which covers the most important processes on a modular basis in individual user departments. Companies can choose for themselves whether or not they want to run manufacturing processes in the cloud.

ERP in the Cloud: An Individual Approach

According to Mauersberg, there is no software that covers all requirements for ERP in the cloud. The ERP expert recommends adopting a “solution-independent qualification process” by collecting the provider’s best practices and the company’s business objectives.

“In a joint workshop, the aim is to define the functional scope and flesh out the solution,” says Mauersberg. Companies that deploy SAP R/3, for instance, and have several hundred customer-specific enhancements quickly realize that integrating the same processes into the new software doesn’t make sense. For Mauersberg, the innovative route could be as follows: “The core processes come from the box, that is also required, which is then extended as a microservice or an app.”

In the SAP portfolio, it would be possible with SAP Cloud Platform to enrich SAP S/4HANA Cloud through microservices. The midmarket software SAP Business ByDesign also includes a development kit that enables apps for special functions. For companies connected to subsidiaries that take business sectors into their own hands, or wish to establish dynamic and agile sections, SAP S/4HANA is an ideal choice.

Embracing the Public Cloud in the Business World

Modern cloud applications are not established everywhere yet, but that doesn’t mean it isn’t possible. iCloud and Google Mail both started out on a small scale, and are used today by almost everyone.

Mauersberg’s forecast is clear: “Because we use it in our private lives, users will embrace the public cloud in the business world.”